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Obamacare Lawsuit May Proceed, Judge Rules

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WASHINGTON, Oct. 22 – A federal judge Tuesday ruled that a lawsuit challenging a major IRS Obamacare regulation may proceed, denying the government’s motion to dismiss.

U.S. District Judge Paul Friedman also denied the preliminary injunction sought by the plaintiffs, but he put the case on an expedited schedule and declared he would rule on the merits on or before Feb. 15, 2014.

“We have been hoping for a quick ruling since we filed this case, and now it looks like we will get it,” said Sam Kazman, general counsel for the Competitive Enterprise Institute, which is assisting in coordinating the case. “We are hopeful the forthcoming ruling will invalidate the attempt by the IRS to eliminate the distinction between states that participate in the insurance exchange program and those that do not.”

Tuesday’s ruling followed a Monday hearing in the case, Halbig v. Sebelius, to consider both a preliminary injunction sought on behalf of one of the plaintiffs and a motion by the government to dismiss the case. Plaintiffs in the lawsuit – individuals and small business owners in six states – sued over an IRS regulation imposed under the auspices of the Affordable Care Act that will subject them to penalties and force them to cut back employees’ hours, even though they are located in states that have refused to set up their own insurance exchanges. The complaint and preliminary injunction filings can be viewed at cei.org/halbig-v-sebelius.

The Obamacare statute authorizes health insurance subsidies to qualifying individuals in states that created their own healthcare exchanges. These subsidies trigger the employer mandate – a $2,000-per-employee penalty for companies that don’t provide government-approved health coverage to workers – and expose more people to the individual mandate, which requires individuals to purchase insurance or pay a fine. But without authorization from Congress, the IRS vastly expanded those subsidies to cover the 34 “refusenik” states that have decided not to set up such exchanges. The statute plainly says businesses in these nonparticipating states should be free of the employer mandate, and the scope of the individual mandate should be reduced as well. The IRS rule expands both mandates and deprives states of the power given to them by Congress to exempt their residents and businesses from these requirements.

Mike Carvin, a partner at Jones Day who co-argued NFIB v. Sebelius at the U.S. Supreme Court in 2012, argued on behalf of plaintiffs in Halbig v. Sebelius.